Big four bank profits to top $15 billion for first half

The combined profits of Australia's big four banks likely exceeded $15 billion in the first half, as lenders started to benefit from a round of late 2016 interest rate hikes and strong home loan growth.

Big four investors have enjoyed share price gains of more than 6 per cent so far this year, and half-year results from three of the big four in the coming weeks are expected to show profits also ground higher across the industry.

Even so, there remains a question mark about whether National Australia Bank and Westpac can sustain their dividends, as the industry prepares for looming rules that may force lenders to set aside billions more in capital.

ANZ Bank will kick off the half-year bank reporting season this Tuesday, with analysts tipping a $3.5 billion cash profit in the six months to March, and a flat interim dividend of 80¢ a share.

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Customers are starting to realise there's a different way of doing their banking.Credit:Paul Rovere

National Australia Bank on Thursday is tipped to deliver earnings of $3.25 billion and also keep its dividend flat.

Macquarie Group, whose share price last week closed at $93, not far off its 2007 record high of $97.10, is tipped to deliver a full-year profit of more than $2.1 billion on Friday.

That would exceed last year's record of $2.06 billion for the investment bank, which will be among the biggest local winners from promised company tax cuts in the United States.

"I just cannot believe they can be as confident on their capital strength," Mr Johnson said.

Credit Suisse analyst Jarrod Martin highlighted dividends as a key issue for NAB, pointing to its high payout ratio, but said he believed the payout would remain flat.

Some are also sceptical about whether the gains to banks from hiking rates may be cancelled out by stiff competition for loans, which has led to discounting for customers.

Senior analyst at Regal Funds Management, Omkar Joshi, said banks' margins were likely to have contracted, as the bulk of recent interest rate hikes by banks occurred at the end of their first half, which ends in March.

While these interest rate hikes will likely boost bank margins over the next six months, there is also a risk that too many rate rises will cause some highly-geared borrowers to struggle to meet their repayments.

"At what point does re-pricing start to hurt asset quality?" Mr Joshi said.